Brits’ growing taste for Guinness – and price hikes – drive Diageo forward
Diageo share price popped just shy of 2 per cent when markets opened this morning, as the Guinness maker revealed a 10.7 per cent increase in net sales to £17.1bn.
During the term, the world’s largest spirit maker said that a demand for premium-plus liquors contributed to 57 per cent or overall organic net sales, which helped offset falling volumes.
One analysts said the results told a “mixed and complicated story.”
UK growth was driven by an uptick in Guinness sales.
“We drove double-digit organic net sales growth in scotch, tequila, and Guinness, with our premium-plus brands contributing 57 per cent of overall organic net sales growth,” Chief of Diageo Debra Crew said in a statement.
Crew replaced longstanding boss Sir Ivan Menezes following his unexpected death earlier this summer.
In North America its organic sales remained flat as demand for spirits in the US declined.
Net sales in its Johnnie Walker scotch fell by 13 per cent and Crown Royal whisky net sales declined 10 per cent.
Last month, the maker of Guinness said will almost triple production of its zero-alcohol brand in response to a growing consumer taste for non-alcoholic drinks.
Chris Beckett, head of equity research at Quilter Cheviot: “The results from Diageo today paint a bit of a mixed and complicated story for the drinks giant. We knew sales in China will have slowed as a result of lockdown, however, North America is also falling despite consumer spending holding up and the economy proving to be robust. The post Covid-19 normalisation is happening later in the spirits industry than in other categories.
“Sales are still growing, but this is all due to price increases, rather than volumes. This is okay, premium brands are doing well but some subsidiary brands are struggling and Diageo is being a little vague in when they expect improvement to happen. The business talks about ‘gradual improvement’ over time, not giving any firm expectations. This will leave it with some questions to answer, and for a quality business like Diageo, we would expect it to turn the ship around in good time but with timeframes attached,” he said.
“Looking ahead to fiscal 24, I expect operating environment challenges to persist, with continued cost pressure and ongoing geopolitical and macroeconomic uncertainty. This requires us to move with greater speed and agility,” Crew added.
“My near term opportunities to drive the business focus on bolder and faster innovation, stepping up operational excellence to meet consumers’ evolving tastes and preferences while driving scotch, tequila and Guinness.”